A record number of Americans are now 401(K) millionaires, according to analysis from retirement plan provider Fidelity.
The company analyzed over 24 million accounts in the US in the period between July and September last year.
It found some 544,000 people have reached the impressive $1 million threshold with their retirement savings.
This is up a huge 9.5 percent from the previous quarter.
The number of IRA-created millionaires also increased by nearly 5 percent to 418,111, according to the research. Fidelity analyzed over 16 million IRA accounts.
These individuals are able to reach this level of savings for their later life by starting early in their careers and contributing consistently over many years, Fidelity said.
In 2024, they were also buoyed by significant stock market gains.
The S&P 500, which tracks the 500 biggest companies in the US, was up more than 20 percent last year for the second year in a row.
A record number of Americans are now 401(K) millionaires, according to analysis from retirement plan provider Fidelity
Most workers have access to a 401(K) plan, an individual retirement account (IRA), or both.
A 401(K) is offered through an employer, and a company may match any contributions a worker makes, typically around 3 percent.
An IRA, on the other hand, is opened by an individual through a broker or a bank.
401(K)s have higher contribution limits than IRAs and tend to be pre-tax, but IRAs typically offer more options for stocks to invest in.
While the Fidelity research found a record number of Americans have $1 million already saved for retirement, the typical amount people have in their nest egg is much lower.
The average balance in these 401(K) accounts is $132,300 across all age groups. The highest average balance is seen among 65 to 69-year-olds, at $252,800.
Many people struggle to save for retirement as well as grappling with mortgage payments, childcare expenses or day-to-day bills.
A 2024 AARP study found a huge 20 percent of Americans over the age of 50 do not have any retirement savings at all.
Those who have more than $1 million in their retirement savings tend to have started working toward that milestone early in their careers, Yahoo! Finance reported.
401(K)s have higher contribution limits than IRAs and tend to be pre-tax, but IRAs typically offer more options for stocks to invest in
401(K) millionaires are able to reach this level of savings for their later life by starting early in their careers and contributing consistently over many years
Caroline Eby, a finance worker in her late fifties, told DailyMail.com last year how she is edging closer to the $1 million mark – despite never earning more than $80,000 in her life
Even small contributions can go a long way over time, and the longer your funds are invested the longer they can take advantage of compound interest.
Put simply, compound returns are the returns earned on previous returns. Over the years, these snowball as income is earned on an ever-larger account balance.
If you start investing $420 a month at age 25, and your portfolio delivers a 7 percent return, you will have just over $1 million by the time you hit retirement age at 65.
Caroline Eby, a finance worker in her late fifties, told DailyMail.com last year how she is edging closer to the $1 million mark – despite never earning more than $80,000 in her life.
Eby, who is from Washington D.C., said: ‘I started saving at age 25 when I was making $22,000 a year in manufacturing.
‘Each year, I upped my contribution by 2 percent if I could afford it. I maxed my contribution somewhere around 12 percent.’
She added: ‘I’ve never married and have always fully supported myself. I’m so happy and proud of myself for the sacrifices I made 30 years ago.
‘Like everyone told me, slow and steady wins the race.’
Experts warn to make sure you take advantage of any match offered by your employer, and try to avoid withdrawing money early from your 401(K), as this can trigger a fee.
Experts advise maintaining a diversified, balanced portfolio with an asset allocation that adjusts as you age, Yahoo! Finance reported.
If you are not sure how to shape the best retirement portfolio for your goals, ask for help from a financial adviser.